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Takeover Defenses of IPO Firms

34 Pages Posted: 8 Jan 2002 Last revised: 29 Aug 2008

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business

Date Written: 2002

Abstract

Many firms deploy takeover defenses when they go public. We find that IPO managers are more likely to deploy defenses when their compensation is high, shareholdings are small, and oversight from non-managerial shareholders is weak. The presence of a takeover defense at the time of the IPO is negatively related to subsequent acquisition likelihood, yet has no impact on takeover premiums for firms that are acquired. These results do not support arguments that takeover defenses facilitate the eventual sale of the IPO firm at high takeover premiums. Rather, they suggest that managers shift the cost of takeover protection onto non-managerial shareholders. Thus, agency problems are important even for firms at the IPO stage.

Keywords: Initial Public Offerings, Takeover Defenses, Acquisitions

JEL Classification: G30, G32, G34, G24

Suggested Citation

Field, Laura Casares and Karpoff, Jonathan M., Takeover Defenses of IPO Firms (2002). Journal of Finance, Vol. 57, No. 5, October 2002. Available at SSRN: https://ssrn.com/abstract=286923

Laura Casares Field (Contact Author)

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

Jonathan M. Karpoff

University of Washington - Michael G. Foster School of Business ( email )

Box 353226
Seattle, WA 98195-3200
United States
206-685-4954 (Phone)
206-221-6856 (Fax)

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